The Bottom Line: MorningStar Breaks Down Silos Between Finance, Operations

Jamie Ranzan knew what she wanted to do from an early age.

“I have wanted to work in senior living since I was 10 years old. Nobody believes me, to the point where I’ve had to break out my childhood yearbook and show them,” Ranzan, CFO of MorningStar Senior Living, said in a recent interview for Senior Housing News’ “Bottom Line” series.

Ranzan joined Denver-based MorningStar in October 2016, as the company began a sustained period of growth. Today, the owner and operator has a portfolio to 27 communities in operation or under development in Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, New Mexico, Oregon and Texas. In August, MorningStar announced a partnership with Houston-based real estate investment and services firm Hines Interests to build senior housing, beginning in 2020 with a 112-unit assisted living and memory care facility in Houston’s River Oaks neighborhood.

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Ranzan, along with CEO Ken Jaeger and the rest of MorningStar’s leadership team, is focused on maintaining the company’s culture and mission while growing in scale. And Ranzan touts MorningStar’s close alignment between operations and finance, which stems in part from her own experience living in a community and serving as interim COO.

This interview has been edited for length and clarity.

Has senior living has gotten more operationally and financially complex over the last few years, and if so, how has that placed new demands on you as a CFO?

Coming into MorningStar, I had a great opportunity to actually live at one of our communities for a whole month while my family was transitioning and moving, and I was trying to get settled over here. I’d always thought that I had an understanding of operations and the demands of the community until I actually was able to live in one as CFO.

Seeing the demands of what the employees, the residents and the leadership at the community [level] are going through, and being able to leverage that experience into my role and working hand-in-hand with the operation side, rather than [remaining in] traditional silos, has been imperative to our intrinsic synergy and growth that we have between our development side, operations and finance.Breaking down those silos was just a really natural and organic process.

Some of the immediate [observations] were the typical demands that come along with running the business side — we have deadlines that we have to meet for investor groups, to enter our home office reporting. How can we make that better and different and come at things in a different direction, be able to alleviate some of the pain points and work with the operation side, rather than [stating] “here’s what we need.” It’s more about how can we do this together to make this more efficient and more valuable for our takeaway to help everybody.

When you started with MorningStar, where was the company at and what were your main priorities?

Part of the reason I joined MorningStar was because our approach to growth is very disciplined, very calculated, very analytical. That makes it a lot more focused and transparent when we’re going into deals and working with partners. There was a lot of opportunity to introduce and implement more formal processes and policies to help alleviate some of the day-to-day recurring tasks and field transactions that [occur]. One of my big areas of focus was bringing in an infrastructure on the finance side of the house that would allow us to be more scalable and nimble as we continue to grow and expand.

The more we can push our margins to maximize our mission is just a huge blessing and at the root of MorningStar and not just meeting our ownership’s, partners’ and investors’ expectations, but exceeding them and continue to perform at an elevated level.

MorningStar Senior Living CFO Jamie Ranzan

Can you talk about moments of particular challenge or change, and how you worked through or are working through those challenges/changes?

One of the great opportunities that I had been able to experience here is being an interim COO while I was carrying the CFO position as well, when we were in between leadership roles on the COO side for about half a year.

I thought I had an understanding of the [role], but actually sitting in the seat just gave me an additional level of understanding and compassion, wanting to make us more nimble and able to accommodate on the finance side to enhance the operation side, wherever possible. [To] really support that could be a daunting task.

For somebody that hasn’t been in an operators seat, when you have (MorningStar CEO) Ken Jaeger and (Managing Partner) Matt Turner surrounding you as your leaders, it’s almost impossible to not be able to step up and to bring your A-game. They really lead through by [example], being patient and understanding and knowing that a person taking on [an additional role] is going to need extra support. And they never fell short; they never do fall short on that. They really push you to be your best and give you guidance and support so that you go out of your comfort zone, but just enough that you know that they’re there and you’ll get through it together as a true team.

How are you thinking costs/expenses for 2019? Are there items on the balance sheet that are of concern , or areas where you expect to make significant investments, or achieve any cost reductions? Are margins under pressure this year?

Obviously employee costs [are a concern] and we’re trying to come at it from different angles and see what we can do to enhance the quality of lives of our employees.

Our team members are the driving force in our [operations]. How can we enhance our employees and team members lives through better benefit offerings, more affordable health care every angle, and reduce the cost of turnover? We’re heavily invested in [our staff], trying to be strategic and innovative and listening to what the team members are saying and really seeking that feedback from them, what’s important to them and what we can do and work together.

For us, it’s a market-by-market, community-by-community approach. We really get into each community, identify some of the pressures in each rather than with a wide lens, and hone in on what we can do differently and optimize our profits. We make sure that team member engagements are as high as possible, ensuring that the residents’ experiences are not just meeting their expectations, but exceeding them in each market.

How is the availability and cost of capital at the moment? Do you expect any tightening of the debt or equity markets in the near term?

We’re always keeping our eye on the ball around the capital markets and how it’s impacting rates in our borrowing to make sure that our leverages are low and healthy. That gives us a lot of flexibility and options and [if the lending environment] does start to change. We’ve been really fortunate to have some great partners and we also are involved with the deals on an investment level — I really like that alignment. As a manager going into deals and having that alignment and shared interest, I think really just elevates and sets us apart as well.

What’s your take on M&A and development at the moment? We are hearing that acquisitions are tough to come by unless you’re willing to pay a premium, with a lot of private equity chasing deals. How is MorningStar thinking about growth in the next 3-5 years?

Historically, our growth has been mostly through development. And we’ll continue to focus on that while keeping in mind and evaluating other options. If there’s a [value-add] deal that makes sense, we definitely consider it and will absolutely do the right partnerships to execute and make it happen.

“I have wanted to work in senior living since I was 10 years old. Nobody believes me, to the point where I’ve had to break out my childhood yearbook and show them.

MorningStar Senior Living CFO Jamie Ranzan

We may be seeing Medicare Advantage start to cover some senior living services, is that on your radar, any plans to play in the MA space?

We’re always watching the industry and staying current with new environments. We’re private pay right now and not actively exploring [Medicare Advantage], but we’re watching to see what the trends yield.

Mission vs. margin is a theme in senior living and maybe a challenge. Do you ever feel like you’re fighting to protect margin while others in the organization are freer to focus on mission? How do you define a healthy margin in this business and ensure that you’re striking the right mission/margin balance?

We love that at MorningStar it’s one of the driving forces. Ken is heavily involved with Lifewater International drilling wells in Ethiopia where there are 1,400 children a day that are dying due to a lack of clean drinking water, and building homes in Nicaragua. He’s really focused on taking our margins and maximizing them to fuel the mission. We had a recent portfolio transaction, and Ken and Matt put their profits from that into a donor advised fund.

The more we can push our margins to maximize our mission is just a huge blessing and at the root of MorningStar and not just meeting our ownership’s, partners’ and investors’ expectations, but exceeding them and continue to perform at an elevated level.

On a personal note, how did you end up working with MorningStar, did you ever envision yourself in the senior living industry back at the start of your career?

I have wanted to work in senior living since I was 10 years old. This is what I’ve always wanted to do. I wasn’t sure I would ever be able to land where my passion really lies. But I was fortunate enough to get there working through through different real estate companies and then [working] in senior housing in California.

I heard about the opportunity at MorningStar and the more I learned about the company, I couldn’t help but explore the option. My values and personal goals aligned so closely with the owners in the mission of the company and the entire team. It’s just unheard of. I can’t point to one pivotal moment in my career that would have blessed me enough to be at MorningStar. But they’re dedicated and committed to giving the profits to the poor and to treating the team members the way that we do.

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